Montana Petroleum Association

Montana Petroleum Association
HEARD IT THROUGH THE PIPELINE

September 28, 2007

The Montana Legislature passed SB 19 in the 2007 session becomes effective October 1, 2007. Operators are now required to give a minimum notice of 20 days to the surface owner before disturbing the surface; and you are required to give them copies of the law and a brochure developed by the legislative council. The new Montana law sections are attached and this link will take you to the brochure: http://leg.mt.gov/content/publications/lepo/hb790brochure.pdf

In other split estate news, the report produced by the subcommittee received some national recognition recently. The Legislative Research Librarians section of the National Conference of State Legislatures gave the report its Notable Documents award. The judges said, "We commend your publication as innovative in providing substantive information on contemporary issues of interest to legislatures."

MPA encourages you to double check the new law and pass this information to your field personnel.

Public Land Law Conference
The University of Montana’s Law School Review (law school students) held their 31st annual conference on September 24-26th. The topics of discussion were energy and climate change effects on the West. I would like to provide a quote from the opening speech that gives you some idea of the conference content. “Dear Westerner: We may not know your name, but we already know one pretty private thing about you. You have been involved in a tempestuous relationship pursuing a mad romance with fossil fuel. But now, thanks to a spectrum of big changes, from global climate change to rising energy prices, your love affair with petroleum is winding down. It’s time to go in search of a new relationship, one with better prospects for long-term happiness.”

There was not a balance of view between the speakers. Some topics panels were better than others but for the most part the environmental message was loud and clear. Two presentations were of particular concern to MPA.

T.O. Smith, Special Projects Coordinator for the Montana Department of Fish, Wildlife and Parks. Mr. Smith was the lunch speaker on Tuesday so there was no opposing view and his long presentation left little time for questions. The oil and gas industry was attacked by the FWP across the state. They felt that oil development was slightly more destructive than clean coal development, and they labeled oil as “neutral” because the development was taking place primarily in crop land in Richland County so FWP is not concerned about habitat fragmentation and loss. FWP is highly concerned about growing gas development in North Central Montana (Shelby to Glasgow), Cedar Creek Anticline and the entire south east corner of Montana from the rush for CBNG development. Mr. Smith made several points repeatedly:

The rapid increases in energy development had them concerned about loss of habitat. Smith added that any well density tighter than one well per section was of concern.
FWP lacks knowledge about the impact of development on wildlife.
The lack of money and personnel at FWP. Smith suggested industry mitigation funds and general fund support.

On Wednesday morning the panel named the “Flathead Debate” discussed the issue of coal and coalbed natural gas (CBNG) development in southeastern British Columbia. The debate centers around the desire of the BC Government to develop coal and CBNG resources in an area adjacent to Glacier and Waterton Lakes Parks. While the area is clearly well outside National Park boundaries, it is considered a special place for its scenic beauty and the fact it is the head water for the North Fork of the Flathead River.

Rich Moy, Water Management Bureau Chief for the MT Dept. of Natural Resources was the lead speaker. Mr. Moy spoke of his 23 year involvement with coal mining development in the area and his work over the years to protect that area. Moy centered on the 1909 Boundary Water Treaty between the U.S. and Canada and the fact that they have been successful in stopping the proposed development. Moy said that CBNG is another attack on the area and that if the development were to proceed that a domino effect would occur and the mining would follow. A Canadian environmentalist and a resource specialist from the Salish and Kootenai Tribes rounded out the rest of the panel. The environmental fellow, Casey Brennan, spoke of their efforts to raise public outrage against the proposal and Rich Janssen said the Confederated Salish and Kootenai Tribes opposed the development because the land held sacred value.

Montana Association of Oil, Gas and Coal Counties Talk Grouse
The Montana Association of Oil, Gas and Coal Counties (MAOGCC) met in conjunction with the Montana Association of Counties (MACo) annual conference in Great Falls on September 24, 2007. A county commissioner had drafted, for MACo’s endorsement, a resolution “To limit Sage Grouse Bag Limits and to Reduce Speed limits on County Roads Within Areas of Sage Grouse Habitat” (See attached document). He expressed concern about hunting pressure on isolated lek populations, vehicle mortality, and West Nile virus impacts. A commissioner, who had attended the MPA annual meeting’s wildlife forum, commented that leks in oil and gas production areas were still there, although there was some decrease in populations during development stages. He echoed other commissioners’ concerns that the resolution could be “turned around on us”. Other commissioners said that changing speed limit signage and speed limit enforcement would be too costly. The commissioners thought the resolution’s recommendation for implementing a tag system for sage grouse limits – two sage grouse tags per hunter -- was a good idea and would stifle hunters taking two birds repeatedly through the season. The commissioners advised that MAOGCC members individually contact members of the Montana Fish, Wildlife & Parks Commission to advocate the sage grouse tag system. Overall MAOGCC commissioners recommended that the resolution be withdrawn from consideration by MACo, which the author of resolution did.

2007 Rocky Mountain Unconventional Gas Conference
The South Dakota School of Mines and Technology will host the 2007 Rocky Mountain Unconventional Gas Conference. The conference will take place October 10-12, on the School of Mines campus in Rapid City, SD.

Over the past decade, there has been a tremendous growth in the exploration and production of unconventional gases. This growth has been fueled by new insights, technological advancements and practical innovations to enhance productivity, reduce costs and mitigate environmental impacts. This conference is an opportunity to hear from professionals on these issues. In addition, the main points of interest include coalbed methane, shale gas reservoirs and unconventional shallow gases.

Participants have the opportunity to attend a short course, Appraising Coalbed and Shale Gas Reservoirs, on Wednesday, October 10. The purpose of this course is to provide practical insights and tools that can be used to identify and appraise coalbed and shale gas reservoirs.

For more information and to register, please visit www.sdsmt.edu/learn/professional or call (605) 394-2693.

MONTANA STATE LANDS DECEMBER 2007 LEASE SALE
In the attachments you will find the preliminary list of parce
ls scheduled for the December lease sale. MPA will watch this list closely for changes.

ROYALTY WITHHOLDING NEWS
The Department of Revenue has posted information on its website relating to the royalty withholding laws that become effective the 1st of January 2008. They can be seen at the following website: http://mt.gov/revenue/forbusinesses/naturalresource/mineralroyaltywithholding.asp

I would ask that you take some time and have the appropriate folks review the information on this page, particularly the draft administrative rules. If you have any comments please send them to me as soon as possible. These rules will be officially published on October 15th with a closing around November 15th. At this time a hearing is scheduled for October 26th. MPA will provide additional information once the rules are published, but we should spend this advance time in review.

A CONVERSATION ON EDUCATION WITH EDUCATION
Good News! MPA was invited by the Montana Taxpayers Association (Montax) to attend an outreach meeting with the Montana Rural Education Association (MREA) to discuss the potential of teaming together on areas of mutual concern. MREA is concerned about the loss of funding for rural schools and their inability to recruit and retain teachers as demonstrated in their following action plan.

MREA Action Plan

1. Collecting information from all Montana schools necessary for making decisions on the status of legal challenges to the current funding system.

2. Opening communications and building relationships with the Montana’s business and civic groups in an effort to explain the challenges facing Montana schools.

3. Promoting major “forums” and other opportunities to increase awareness of the challenges facing Montana schools with the state’s policy makers, legislative leaders and the general public.

4. Working with specialists in public relations to develop and refine the message that our association should be delivering.

5. Direct communication to all Montana elected officials clearly articulating the school funding and other challenges facing our members.

6. Expanding support to those promoting natural resource development within the state as a means of encouraging their support of K-12 education issues and concerns.

Having partners as we face mounting challenges in the development of oil and gas in Montana is heartening. MPA has connected with the Executive Director of MREA and we look forward to opportunities to work together for our mutual benefit. I would like to thank Jack King for attending this Sunday meeting on behalf of MPA. This contribution from members expands MPA’s ability to show up and after all, the world is run by those that show up. Thanks Jack!

Climate Change Advisory Committee Recommendations Previewed
At the September 26 meeting of the Clean Air Act Advisory Council, Montana DEQ staff reviewed a summary of draft recommendations of the Governor’s Climate Change Advisory Committee (CCAC). The 55 recommendations are 99% final and will be approved by the CCAC next week, DEQ staff reported. The recommendations -- in a report, executive summary and extensive supporting appendices – will be forwarded to Governor Brian Schweitzer (D) for his action. The summary document (see attached pdf document) states that the principal sources of green house gas emissions (GHG) in Montana are electricity use and agriculture – about 27% each – with transportation sector emissions being third. Gasoline powered vehicles account for 60% of the transportation sector emissions and diesel fuel consumption accounts for 34%. GHG emissions in Montana are about 0.6% of the total U.S. GHG emissions. Montana GHG emissions are recommended to be reduced to1990 levels by 2020 and an additional 80% reduction by 2050. Mandatory GHG reporting protocol should apply to all sectors. Fossil fuel power plants are to meet fuel-neutral emissions levels and implement terrestrial and/or geologic sequestration as part of operating permits. EPA Natural Gas STAR program should be implemented for emissions reductions at oil and gas operations. Financial incentives and disincentives should be developed for purchase of varying fuel economy vehicles. Montana should increase use of low carbon fuels to offset traditional crude oil derived fuels – a high carbon fuel tax is an option. Emissions from off-road engines should be reduced through retrofits. Montana-produced biodiesl should be at a level of 20% of the 2004 diesel consumption by 2020. Fifty million gallons/year of ethanol should be produced in state by 2010. Regulatory and financial incentives should target reductions consumption of electricity and natural gas in existing buildings by 20% by 2020 and by 50% in new buildings. The DEQ is analyzing the recommendations to determine which can be done within the department, which will need rulemaking and which will need legislation. Members of the Governor-appointed CCAC, its mission and publicly available documents are available at CCAC website www.mtclimatechange.us The state contracted with the Center for Climate Strategies (http://www.climatestrategies.us/ ) which provided considerable help including serving as facilitators, providing a website, and a draft inventory of Montana emissions. Also assisting the CCAC was a six member scientific advisory panel comprised principally of academics.

MBOGC/MPA ESSAY CONTEST
We are fortunate again this year to announce another essay contest. We have kept the prize level at $6,000. The contest is open to any Montana high school age student, with a few small exceptions. Please look at the attached contest rules. If you or your employees have high school age students please encourage them to participate and also please feel free to share this with your friends outside the industry. Last year we had 137 essay submissions, please help MPA break that record!

EPA COLLORBORATIVE SHOWCASE CONFERENCE
Earlier this month MPA Executive Director, Dave Galt was invited by MDEQ Director Opper to share an industry perspective with a variety of Federal EPA and other agency resource managers. MPA discussed involvement with the development of the Montana registration rules and pilot project at Montana Tech to use students to assist in oil and gas permitting. While I was there I was intrigued by a presentation by representatives from the EPA, National Park Service and the Forest Service on the collaborative effort in the four corners area of the US. The document can be viewed at the following web site: http://www.nmenv.state.nm.us/aqb/4C/DraftTaskForceReport.html. MPA thought this document may be of interest to members working on similar projects who may not be aware of this effort.

ARTICLES OF INTEREST
Governor Schweitzer’s Climate Change Advisory Council releases draft recommendations:
http://www.missoulian.com/articles/2007/09/28/bnews/br42.txt

Billings Gazette guest editorial on oil and energy. Nicely written.
http://www.billingsgazette.net/articles/2007/09/27/opinion/guest/20-buttons.txt?refcid=32395#32395

Senators Tester and Baucus, more on the CBNG Project in British Columbia
http://www.billingsgazette.net/articles/2007/09/27/news/state/37-parkstatus.txt#comments

For Hunters: Note by whom and where this great trophy was harvested.
http://www.helenair.com/articles/2007/09/27/outdoors_top/c010927_01.txt

MPA radio spot for September 28, 2007 on Montana Public Radio. MPA Executive Director responds on wildlife issues. The text is attached (MPR 2007.doc).

Montana Petroleum Association
HEARD IT THROUGH THE PIPELINE

September 7, 2007

MPA Annual Meeting Follow Up

The MPA Annual Meeting concludes with a great turn out in Billings for the industry appreciation day luncheon. Nearly 200 industry personnel and guests attended the event.

The annual meeting is the time when our Board of Directors and officers are elected. MPA has elected the following new officers for the 2007/08 term:

PRESIDENT: Dave Ballard, Ballard Petroleum Holdings
VICE PRESIDENT: Geoff Craft, ExxonMobil
TREASURER: Chip Youlden, Helis Oil and Gas

Geoff Craft and Chip Youlden are also new to the MPA Board of Directors, as well as Ward Polzin of Enerplus Resources (USA) Corp.

Our program included a wildlife roundtable that had experts from across the country to discuss impacts of oil and gas exploration on Montana’s wildlife populations. MPA also offered a workshop by the Department of Revenue for those interested in the royalty withholding that goes into effect on January 1, 2008. Our Wednesday program included Brian Johnson of Enbridge Pipeline, H. Leighton Steward (climate change), Mr. Dan Bucks, Director of Revenue, and our keynote speaker Mr. Terry Hildestad, President and CEO of MDU Resources Group. The meeting was a great success, and we wish to thank those who spoke and participated in our workshops, our sponsors, and all the folks who took time out of their busy schedules to attend the meetings.

Follow-up Points:

Draft Administrative rules from the Montana Department of Revenue (MDOR) regarding implementation of royalty withholding legislation passed in the last legislative session and effective on January 1, 2008. MDOR will take comments until September 10th. Comments can be emailed to Dave at dave@montanapetroleum.org . This is just the draft stage where we have the opportunity to comment on these rules before they begin the formal adoption process. There has been a rule hearing scheduled for October 26, more details to follow.
A complete list of MPA Board of Directors, offices and committees is available on the MPA website: www.montanapetroleum.org
Executive Director Galt will post his notes on the wildlife forum on the MPA website under the Members Only section’s wildlife file. If you need a member ID and password please contact Bobbie Gardner at MPA@montanapetroleum.org
Interested in the Billings Gazette coverage of Mr. Hildestad? Please check out:
http://www.billingsgazette.net/articles/2007/08/30/news/state/31-gasprices.txt

SPLIT ESTATES LAW CHANGES EFFECTIVE OCTOBER 1, 2007
In less than one month, changes to Montana’s laws regarding split estates that were passed in the last session become effective. The most significant change to statute was an increase in the notice period that is required to be given to surface owners before any surface disturbance occurs. The MINIMUM notice period has been increased from 10 days to 20 days. Additionally, the operator is required to give the surface owner copies of the Montana statute and, if available, the Legislative Council brochure. While the 2007 Montana Code has not been published, the Legislative Council sent the new 2007 section to MPA for distribution. It is attached as a PDF file. MPA expects the brochure to be available within 10 days, and we will forward that to you as soon as possible.

EPA Coal Bed Natural Gas Water Study
EPA will be conducting a survey of coal bed natural gas (CBNG) operators and
their management of produced water. As part of survey development, EPA
will be conducting a site visit in the Powder River Basin October 15-19.
The purposes of this visit are: (1) observe and document current treatment
and beneficial reuse of CBM produced water; (2) table-top discussions on
the current methodology and questions in EPA's CBM survey; and (3)
provide and opportunity for interested stakeholders to share their
thoughts and data with EPA. EPA contacts:
Colleen Gillespie, 303-312-6133; Carey Johnston, 202-566-1014.

MPA will provide more details when we receive them from the EPA.

Bureau of Land Management BMP Awards
BLM has officially opened the nominations for the 2008 Best Management Practices award for oil and gas operations. You may view streaming videos of the 2006 and 2007 winners and newest technology at the following link:
http://www.blm.gov/wo/st/en/prog/energy/oil_and_gas/best_management_practices/bmp_awards.html

If you plan to submit a nomination for an award please keep MPA informed as we will provide whatever assistance we can. This is a great opportunity for recognition for all the work we do enhancing our environment (that we never get credit for). BLM nomination documents are attached.

Articles of Interest
MPA Wildlife Workshop at Annual Meeting:
http://www.billingsgazette.net/articles/2007/08/28/news/local/21-grouse.txt

Theodore Roosevelt Conservation Partnership Attack Article:
http://www.billingsgazette.net/articles/2007/08/18/opinion/guest/40-blm.txt

MPA Response to TRCP:
http://www.billingsgazette.net/articles/2007/08/28/opinion/guest/30-drilling.txt

MPA Editorial in Helena Independent Record, September 5, 2007
http://www.helenair.com/articles/2007/09/05/opinions/a040905_03.txt

Wildlife Interest…You don’t suppose this could happen with Sage Grouse???
http://news.yahoo.com/s/ap/20070906/ap_on_sc/wrong_fish